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With $160 Billion Merger, Pfizer Moves To Ireland and Dodges Taxes (arstechnica.com)

Posted by samzenpus on from the letter-of-the-law dept.

ourlovecanlastforeve writes: In a $160 billion dollar acquisition, drug company Allergan, a small company based in Ireland, "purchased" Pfizer, allowing the drug producing giant to move to Ireland and lower its tax rate from about 25 percent to 17-18 percent. Ars reports: "Such inversions, which are said to cost the American government billions in lost tax revenue, have drawn scorn from the Obama Administration and the Treasury Department. Last year, President Obama referred to the deals as 'unpatriotic' loopholes and proposed to close them. And last week, the Treasury announced new rules to make such deals more difficult. But Pfizer’s reverse-inversion skirts the rules, in part by keeping ownership split somewhat evenly between the two companies. After the deal is complete, current shareholders of Allergan, which has the majority of its operations in the US, will own 44 percent of the mega company. The remaining 56 percent will be owned by current Pfizer shareholders."

17 of 365 comments (clear)

  1. Good! by footNipple · · Score: 1, Insightful

    America should be punished for having such a ridiculous tax code and a confiscatory corporate tax rate. I'd also move my operation to Ireland if I could.

    1. Re:Good! by Anonymous Coward · · Score: 1, Insightful

      Everything should be about maximum profit for everyone. So, lets embargo pfizer. If they want to sell in america, they have to hire american workers.

    2. Re:Good! by dbraden · · Score: 3, Insightful

      Perhaps, the lack of one to move.

    3. Re:Good! by Kohath · · Score: 3, Insightful

      Pfizer makes 60% of it's revenue outside the US. Why should they pay US taxes on profits earned entirely outside the US? Other countries do not tax foreign profits the way the US does.

      Obviously Pfizer doesn't think they should be subject to such an unfair system. They found a way out. They will still pay US tax on US profits.

    4. Re: Good! by Anonymous Coward · · Score: 2, Insightful

      The poster is totally right. Think of how much larger the benefits brought to the world by the likes of Union Carbide, Metropolitan Edison, TEPCO, Triangle Shirtwiast, Kader Toy, and Aurul would have been if only freed from pesky government crap like taxes.

    5. Re: Good! by ShanghaiBill · · Score: 5, Insightful

      The only way to fix this problem is by taxing the products when they enter the country.

      Except we have treaties that forbid us from doing that. If we violate trade agreements, other countries will retaliate, and the world economy will spiral downward. For an example of this scenario actually happening, Google for "The Great Depression".

      It's ridiculous to allow corporations to hide billions overseas.

      It is ridiculous for America to tax profits on a product made in England and sold in France. It is ridiculous to have absurd tax laws that encourage companies to move jobs overseas. We should tax domestic sales, or domestic revenue, or domestic payrolls, or even domestic profits. But instead we tax worldwide profits, of only companies domiciled in America, giving them a huge incentive to go elsewhere. No other country has a tax like that. It is economic self-sabotage.

    6. Re: Good! by ShanghaiBill · · Score: 3, Insightful

      Invalidating their drug patents and contracting another drug maker to start manufacturing their portfolio as generics would do the job much better.

      Then the flow of companies and jobs leaving America will turn into a torrent. You don't encourage people to stay by building higher walls and becoming more hostile.

    7. Re: Good! by Darinbob · · Score: 4, Insightful

      You can't easily define "domestic" versus "worldwide" profits. Profits come from more than just sales. What we have is essentially income tax for corporations. If I earn money overseas and am not taxed by a foreign entity then I have to pay taxes on it here. For individuals this means you can't use the loophole that you were paid in a different country even though you lived in the US (yes this is slightly broken as it applies even to ex-pats who have not renounced citizenship). So it's essentially the same rule should apply for corporations - if you want to be called a "US company" then you need to pay US tax rates. If the companies don't like it then they can take their headquarters and move it overseas also, since they've long since moved all their actual workers overseas.

      Note also that this company is going to pay taxes in Ireland. Not in high tax parts of Europe. They chose Ireland specifically because it's a low tax state trying to attract more companies, not because the US is the one and only undesirable tax location. The US has a much better corporate tax deal than many other countries, it's just not the minimum that the major shareholders want.

      But it's the US. Poor people have to pay taxes, rich people have access to loopholes. That's why it's unpatriotic, because it shirks the shared responsibility that is a part of being a citizen. If taxes are too high, then this is a problem that should be fixed across the board and not just for mega corporations.

    8. Re:Good! by Kohath · · Score: 2, Insightful

      What percentage of Apple's profits did the US government earn?

    9. Re: Good! by dbIII · · Score: 3, Insightful

      The answer is the money has to come from somewhere or you may as well be living in a hole in the ground in Syria. What is a fair amount is complicated and frequently disputed, but remember, every bit of tax Apple dodges is a bit more incentive for your government(s) to try to get it out of your skin instead since you are a softer target. Hence it pisses people off when Apple avoids tax and they cannot.

  2. Novel Idea by schmaustech · · Score: 3, Insightful

    How about we just lower our tax rate to 15%? We would then be a favorable place to have business and while not cashing in on $0 at the higher rate we would at least cash in on some taxes.

  3. Forbid Medicare and Medicaid payments by Anonymous Coward · · Score: 5, Insightful

    Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.

  4. What do you do by rsilvergun · · Score: 5, Insightful

    when Ireland drops theirs to to 10%? I guess we could do 5%. Then they'd do 2 and a half, then we'll do 1 and they'll do -5% (e.g. incentives) and we can top that with -10%....

    See, this is what's called a "Race to the Bottom". The correct response is to tell Phizer: Thanks, and by. Then you slap a 50% tarriff on their drugs and enforce strict price controls. If that doesn't work you take their patents from them. If they stop "innovating" then fine. We hire folks to innovate in their place and tell them to go pound sand. What you do _not_ do is let them control negotiations and play their game. You will lose sir.

    --
    Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
  5. Time for a policy shift by Copid · · Score: 4, Insightful

    It seems like if we had any sense at all, we'd immediately dump the corporate income tax and replace it with a revenue-neutral increase in the capital gains and dividend taxes. The corporate shareholders ultimately end up paying any dollars that get paid anyway, and humans are much easier to tax than corporations are. A corporation is a shape-shifting non-entity that can "spend a year dead for tax purposes," so trying to change the laws fast enough to get any revenue out of them is a losing battle. All we end up doing is giving them an incentive to do ridiculous things like hold money in foreign accounts and set up subsidiaries all over the world to move revenue around. It's great for the tax lawyers and financial consultants, but it doesn't really get us any real revenue. It's the tax enforcement equivalent of the drug war.

    --
    An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
  6. Soft Power by Etherwalk · · Score: 5, Insightful

    Forbid Medicare and Medicaid payments to companies that choose to move headquarters for the purpose of avoiding US tax. Maybe that will cause them to change their mind.

    You're thinking too small and you're risking a lot of lives. Don't forbid the payments; threaten the underlying patents.

  7. Re:This would level the playing ground by PopeRatzo · · Score: 4, Insightful

    15% Flat rate would level playing ground and make it equal for both individuals, corporations both large and small.

    Rich people don't want their taxes to go up to 15%.

    --
    You are welcome on my lawn.
  8. Gotta understand the decision-making process by Beeftopia · · Score: 4, Insightful

    Gotta understand the decision-making process for politicians:

    1) These companies are big donors.

    2) 90% percent of the population has no idea about this, and fewer care.

    3) Politicians get cash for looking the other way, and it has no impact on their electability.

    I started following these kinds of shenanigans prior to the financial crisis. The blame is on the politicians - not for being self interested, but for actually undermining the society for cash and favors from big donors. The vast majority of the voting public doesn't understand this kind of inside baseball. And the incumbency rate hasn't really changed much as a result of these issues. So the boiling of the frog (this society) will continue until we become Brazil or we snap out of the torpor.

    "A society cannot be both ignorant and free." -- Lady Gaga